- 27 -
2. Whether Mr. Premji Constructively Received Interest Income In
1990
Between August and October 1990, Mr. Premji received a total
of seven checks from M&L representing promised interest payments.
He cashed the first four checks in the total amount of $8,000,
and conceded that the $8,000 was received as interest in 1990.
After he learned that M&L had filed its bankruptcy petition,
Mr. Premji attempted to cash the final interest check, dated
October 9, 1990, in the amount of $7,797 at an unspecified bank.
The bank refused to honor the check. Consequently, respondent
has conceded that the $7,797 was not interest income in 1990.
Mr. Premji contends that the two remaining interest checks
in the amounts of $6,444, dated September 23, 1990, and $7,088,
dated October 1, 1990, are not interest income in 1990 because he
could not have cashed them. He made no attempt to do so.
Instead, he returned both checks to M&L to increase his
investment. M&L did increase his investment and, accordingly,
increased the amount of his interest checks. Mr. Premji's proof
of claim in the bankruptcy proceeding is for $77,972, which
represents his cumulative investment with M&L.
Respondent argues that the amounts of both checks constitute
interest income in 1990 because Mr. Premji, as a cash basis
taxpayer, constructively received the income in that year.
Respondent first raised this issue in her Amendment to the Answer
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011